With more than EUR 3487.98 billion in net assets under management, Luxembourg is the largest investment fund centre in Europe and the second largest in the world after the US. It is the largest global distribution centre for investment funds, with its funds offered in more than 70 countries around the world.
Luxembourg’s investment funds have a dominant share in both the retail and the institutional marketplace in Europe, and are the vehicle of choice in many parts of Asia, Latin America and the Middle East. Luxembourg is also a major centre for alternative asset classes with more than 20 per cent of assets managed by alternative fund managers.
So, why the investment fund industry chooses Luxembourg?
Watch this video and hear what is the CSSF’s approach towards firms wishing to set up operations in Luxembourg.
LUXEMBOURG: THE BEST PLACE FOR YOUR FUND
In Luxembourg the regulator and political authorities are fast moving and renowned for their financial innovation and swift adaptation of new rules and regulations. Luxembourg was the first EU Member State to pass the Undertakings for Collective Investment in Transferable Securities (UCITS) legislation into national law, which helped it to develop into a major centre for investment funds. UCITS became a true brand and is today the most widely accepted retail investment fund structure in the world. A reputation for staying ahead of the game has continued to win Luxembourg new business and in fact turned it into Europe’s number one investment fund centre and the world’s leading hub for global fund distribution.
Luxembourg UCITS are distributed in more than 70 countries around the world, including the Americas, Middle East and Asia. The countries that already invest through Luxembourg funds or have fund managers based in Luxembourg benefit from the cross-border distribution expertise available in that market.
In addition to its strong and successful business model, Luxembourg offers fund managers a wealth of extra benefits. The regulatory environment is backed by a stable political, economic and social environment and an attractive tax regime. The Luxembourg economy offers a comparatively good public deficit management and the government is both proactive and reactive to the needs of the financial centre.
Flexible and business friendly authorities and a close working relationship between the business community and the Government will allow Luxembourg to continue to strengthen its position as one of the world’s most attractive investment fund centres.
Many of the industry’s main players are based or have offices in Luxembourg. This has resulted in the country boasting one of the best infrastructure set ups in Europe, with a plethora of management companies, custodians, auditors and law firms on the doorstep. This abundance of service providers has produced a tremendous wealth of knowledge, experience and skills - all geared towards supporting the fund sector.
Gateway to Europe
International fund managers have made great efforts to go multilingual, and investors will normally be able to find someone in Luxembourg who speaks their language. A founding member of the EU, located in the heart of Europe and with geographical borders to Germany, France and Belgium, the Grand Duchy of Luxembourg can count on a multicultural and multilingual workforce.
Re-domicile to Luxembourg
Luxembourg offers a simple, straightforward process for the re-domiciliation of investment funds, meaning the process whereby a fund migrates from one jurisdiction to another. All types of investment vehicles can be re-domiciled – including trusts, which can be merged into Luxembourg-domiciled structures even though they are not legal persons.
Comment from the Association of the Luxembourg Fund Industry
The UK voted on 23 June to exit the EU and we must all now work to create practical solutions to implement this. For asset managers, whilst Brexit is a business issue and depends on each manager’s business model and strategy, ALFI will be working on practical solutions for the industry.
The impact of this vote will be dependent on future political decisions and trade negotiations and, in order to avoid uncertainty and to ensure that investors continue to be as protected as they are under EU regulation, it is essential that the period for negotiation is not prolonged and that a level playing field is maintained.
The Luxembourg fund industry has a very good relationship with the UK financial services industry and we will work to maintain these good relations. Luxembourg-domiciled investment funds originating from UK asset managers represented 16.5% of the total assets under management in Luxembourg at the end of March 2016 – the 2nd largest group after US asset managers. Several large UK asset managers have made Luxembourg an important part of their strategy for the global distribution of investment funds and have established important UCITS (and AIFMD) management companies in Luxembourg.